Committee advances bill allowing self-directed brokerage, fiduciary standards for state deferred compensation

The House State Government Committee voted to recommend Senate Bill 104 favorably after sponsor Senator Scott Maiden outlined changes to the state deferred compensation program for public employees.

Senator Scott Maiden said the bill addresses several items including a codified fiduciary standard for the roughly $4.5 billion the program manages, an option to purchase less-expensive liability insurance that still covers investments appropriately, and ‘‘self-correcting mechanisms’’ to keep plan provisions aligned with federal law without annual statutory fixes. Maiden noted the bill also adds a self-directed brokerage account option for participants.

Chris Biddle, executive director of the Kentucky Public Employees Deferred Compensation Authority, accompanied the sponsor and provided background on plan usage. Maiden said self-directed brokerage accounts are used by about 2% of participants and that participants using those accounts in the authority’s data had ‘‘a 7 and a half percent larger balance’’ on average than other accounts, though he noted the accounts carry greater investment risk.

The committee recorded no questions that required amendment. The committee adopted the motion to recommend the bill favorably; the recorded committee vote was 15 yes, 0 no.

Action summary: Senate Bill 104 (deferred compensation modifications) — committee recommendation: favorable; committee vote: 15-0. The bill’s sponsor said the changes primarily codify fiduciary duties, provide insurance flexibility and add an optional self-directed brokerage feature to the deferred compensation plan administered by the Kentucky Public Employees Deferred Compensation Authority.